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Inflation Cools in February as Federal Reserve Weighs Options After Bank Failures

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The Consumer Price Index numbers are out for February, and once again the numbers do look good on the inflation front. But that good news comes on the heels of a multi-bank failure that could threaten the Federal Reserve’s plan to continue interest rate hikes to continue fighting inflation.

CPI shows inflation grew 6 percent annually in February, down from 6.4 percent in January. It’s a promising sign for an economy that has had its ups and downs – though certainly more ups in recent weeks. Core CPI, which excludes volatile food and energy prices from the measurement, was up 5.5 percent annually in February versus 5.6 percent in January.

More from the Wall Street Journal:

Prices rose 0.4% in February over the prior month versus a 0.5% increase in January. Core prices increased by 0.5% in February compared with a 0.4% monthly gain in January.

Consumers paid less last month to heat their homes, and prices for medical services and used cars fell as well. Gasoline and food prices both increased, but at a slower pace than they did in January. Shelter costs increased 0.8% over the month.

These signs would point to the Federal Reserve keeping its aggressive rate hikes going – probably at half a percent at their meeting next week – but recent financial crises at multiple banks could give them pause.

Year-over-year inflation has cooled from a recent peak last June, but has remained stubbornly high. That combined with a strong labor market and solid consumer spending introduced the possibility that the Fed could raise its benchmark interest rate by a half-percentage-point at its March 21-22 meeting, after opting for a smaller increase in early February. But the collapse of Silicon Valley Bank and other financial institutions in recent days complicated that decision. The central bank may move more cautiously to assess the state of the financial system.

The Fed’s goal of getting inflation at or below 2 percent is their overriding concern, but fears that their aggressive rate hikes could be breaking the financial industry are causing panic in the marketplace. However, it seems like stock market believes the situation is pretty well contained, as there hasn’t been a major crash yet for the major banks.

Yesterday’s run on First Republic bank appears to have been largely due to a large number of tech industry accounts at the bank. But the big firms are not showing any signs of crisis, and First Republic has regained a lot of value at the opening bell this morning.

That may be enough to keep the Fed on track to raise the interest rate by half a percent, rather than slowing down to just a quarter point.

Wage growth is showing signs of slowing down, according to the most recent jobs report. And while the economy did impress with more than 300,000 jobs created, that was a major slowdown from the half a million jobs created in January, pointing to a cooling on the labor side of the market – all of which is in line with what the Fed wants to see.

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Banking Crisis Worsens: First Republic Bank Shares Plummet to Shocking Lows

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The opinions expressed by contributors are their own and do not necessarily represent the views of RedState.com.

A tumultuous investment market continues to rock the economic sector after the stock price of First Republic Bank took a sharp nosedive on Monday. This comes just days after the collapse of Silicon Valley Bank (SVB) and Signature Bank.

First Republic shares plummeted over 70% during Monday’s early trading. The drop followed the company’s announcement over the weekend that they had received an infusion of capital from the Federal Reserve and JPMorgan Chase.

The San Francisco-based regional bank has 7,200 employees and over $200 billion in assets. CEO Mike Roffler told investors and depositors the company remains strong and “its capital remains well above the regulatory threshold for well-capitalized banks.”

President Biden addressed the recent collapses of SVB and Signature early Monday morning, attempting to reassure Americans that the banking industry is safe and their deposits protected. He touted regulations put in place following the 2008 economic collapse, but also inserted a dig at his predecessors in the Trump administration.

Interestingly, First Republic’s troubles were predicted by CNBC trading “guru” Jim Cramer, in a twisted sort of way. It turns out Cramer had strongly recommended SVB stock recently, even at its peak price of $320 per share. He also recommended buying shares of Signature Bank last year. RedState writer Bonchie noted Cramer’s track record moved from coincidence to downright eerie with Monday’s First Republic news.

Alright, maybe twice is just bad luck, but there’s more. Cramer is going for some kind of record, and in the middle of SVB’s downfall on Friday, he decided to endorse First Republic Bank (FRC). “Very good bank,” Cramer proclaimed on social media.

By the time the market opened up on Monday, FRC was in a total freefall.

Other regional banks are taking hits as the investment market continues to tumble. Zions, Pacific West, Western Alliance and others are feeling the heat, and over a dozen other regional banks were forced to stop trading on Monday to protect investments.

From CBS News:

In a statement on Sunday, CEO Mike Roffler said the bank “continues to fund loans, process transactions and fully serve the needs of clients.” Seeking to reassure investors and depositors, he also said the company’s “capital and liquidity positions are very strong, and its capital remains well above the regulatory threshold for well-capitalized banks.”

First Republic has more than $70 billion available in unused funds, the bank said. The company did not immediately respond to a request for comment.

President Biden hasn’t been widely viewed as a confident leader in turbulent times. There is a distinct disconnect between multiple departments in his administration. Earlier this year, the revelation of a Chinese spy balloon floating undeterred across the span of the United States exposed a gross lack of communication between key defense and intelligence departments. On Monday, former press secretary Jen Psaki inadvertently admitted that Biden is largely unavailable for any work at all during the morning hours, saying it was a big deal for him to be up and giving statements on the financial crisis so early on Monday.

“President Biden does nothing at 9 AM,” Psaki revealed. “The fact that he’s [giving a speech about the bank failure] at 9 AM speaks to how vital the White House recognizes it is.”

Biden’s staff have described him as someone who prefers to be in bed early. This leaves America wondering just when the Commander-in-Chief is awake to deal with this crisis and the myriad of crises facing the nation since he took office.

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Feds Shut Down New York’s Signature Bank, Citing ‘Systemic Risk’

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A second bank has been taken over and shut down by the FDIC in less than a week, just days after the collapse of Silicon Valley Bank.

Now, regulators have shut down New York’s Signature Bank, which they have cited as having “systemic risk,” forcing them to get involved. In a press release, the Federal Reserve Board announced the move, also promising that both SVB and Signature depositors would have full access to their money come Monday.

After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors. Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.

We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority. All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer.

Shareholders and certain unsecured debtholders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.

Signature Bank, like SVB, had ties to the tech industry – though, instead of focusing on tech start-ups, Signature was almost exclusively a cryptocurrency firm, according to CNBC.

Signature is one of the main banks to the cryptocurrency industry. As of Dec. 31, Signature had $110.4 billion in total assets and $88.6 billion in total deposits, according to a securities filing.

It was also the bank that Democratic politician Barney Frank joined after leaving Congress.

The move to shutter the second bank is seen in the financial world as a race to contain the fallout from SVB’s collapse. The Fed is trying to auction the bank’s assets off, accepting bids until Sunday night. There is concern in Washington D.C. that this is the beginning of a bigger financial crisis, one that could rival the Global Financial Crisis from the Bush and early Obama years. The worry from folks like my colleague Streiff is that this is a very big and very slippery slope toward nationalizing the financial markets.

The Fed, in its release, is trying to convince Americans that this is limited to just a depositor bailout and not a greater handout to shareholders and other debtholders, saying “Shareholders and certain unsecured debtholders will not be protected” and that “Senior management has also been removed.”

See the full press release from the Federal Reserve Board below:

Washington, DC — The following statement was released by Secretary of the Treasury Janet L. Yellen, Federal Reserve Board Chair Jerome H. Powell, and FDIC Chairman Martin J. Gruenberg:

Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system. This step will ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.

After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors. Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.

We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority. All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer.

Shareholders and certain unsecured debtholders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.

Finally, the Federal Reserve Board on Sunday announced it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors.

The U.S. banking system remains resilient and on a solid foundation, in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry. Those reforms combined with today’s actions demonstrate our commitment to take the necessary steps to ensure that depositors’ savings remain safe.

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U.S. Economy Still Hot with 311,000 Jobs Created in February

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It’s good news for those looking for work and employers looking for employees.

Today’s jobs report from the Bureau of Labor Statistics showed better-than-expected job creation for the month of February. Nonfarm payrolls far surpassed expectations, rising by 311,000 in February. The Dow Jones estimate prior to Friday’s numbers was around 225,000.

On the flip side of that, the unemployment rate ticked up to 3.6 percent, above the estimated 3.4 percent, as the labor force participation rate increased, bringing more workers into the workforce.

Wages went up, as well, rising 4.6 percent over last year. It was estimated to be at 4.8 percent, and falling below that estimate is good news on the inflation front, according to CNBC.

More from CNBC:

Though the jobs number was stronger than expectations, February’s growth represented a deceleration from an unusually strong January. The year opened with a nonfarm payrolls gain of 504,000, a total that was revised down only slightly from the initially reported 517,000. December’s total also was taken down slightly, to 239,000, a decrease of 21,000 from the previous estimate.

Stocks were mixed following the release, while Treasury yields were mostly lower.

Leisure and hospitality led gains, with an increase of 105,000, about in line with the six-month average of 91,000. Retail saw a gain of 50,000, government added 46,000 and professional and business services saw an increase of 45,000.

Information-related jobs declined 25,000, while transportation and warehousing lost 22,000 jobs for the month.

The stock market appeared to react strongly to the report this morning, with S&P futures going up, but after the morning bell, the major indexes began dropping.

But there are signs in the report that the Federal Reserve may continue to be aggressive in its rate hikes.

In February, the Fed only increased rates by a quarter of a point, slowing down its rate hikes amid positive signs on inflation. But, earlier this week, Fed chair Jerome Powell informed Congress that inflation was heating up again, which would force the Fed to return to more aggressive maneuvers to reach its goal of getting inflation down to 2 percent.

The jobs report is the latest in a somewhat bizarre economic see-saw, where inflation numbers have gone down and then back up, jobs reports and wages running hot, and an aggressive Fed and a timid stock market.

The Wall Street Journal has more on that.

Other recent figures have pointed to a buoyant economy. Consumer spending jumped in January and inflation firmed. Business activity picked up in February. The Federal Reserve is closely monitoring February jobs and inflation figures as it decides how much to raise interest rates this month.

A hot job market has emerged as one of the biggest economic surprises among many twists since the Covid-19 pandemic hit three years ago. With the Federal Reserve aggressively raising interest rates to tame inflation, many economists had expected job gains would cool sharply or even turn into losses by now.

“The labor market’s definitely been stronger at this point than we would have thought maybe six months ago,” said Veronica Clark, economist at Citigroup.

The food service industry is one of the fastest-growing industries, driving a lot of job growth.

The National Restaurant Association is predicting 500,000 jobs in the food service industry this year, most being restaurant staff. On top of that, job growth in industries like food service are helping to offset cuts at major tech firms like Apple, Alphabet (Google’s parent company), and others.

Trending on RedState Video

U.S. Economy Still Hot with 311,000 Jobs Created in February

by Leave a Comment

It’s good news for those looking for work and employers looking for employees.

Today’s jobs report from the Bureau of Labor Statistics showed better-than-expected job creation for the month of February. Nonfarm payrolls far surpassed expectations, rising by 311,000 in February. The Dow Jones estimate prior to Friday’s numbers was around 225,000.

On the flip side of that, the unemployment rate ticked up to 3.6 percent, above the estimated 3.4 percent, as the labor force participation rate increased, bringing more workers into the workforce.

Wages went up, as well, rising 4.6 percent over last year. It was estimated to be at 4.8 percent, and falling below that estimate is good news on the inflation front, according to CNBC.

More from CNBC:

Though the jobs number was stronger than expectations, February’s growth represented a deceleration from an unusually strong January. The year opened with a nonfarm payrolls gain of 504,000, a total that was revised down only slightly from the initially reported 517,000. December’s total also was taken down slightly, to 239,000, a decrease of 21,000 from the previous estimate.

Stocks were mixed following the release, while Treasury yields were mostly lower.

Leisure and hospitality led gains, with an increase of 105,000, about in line with the six-month average of 91,000. Retail saw a gain of 50,000, government added 46,000 and professional and business services saw an increase of 45,000.

Information-related jobs declined 25,000, while transportation and warehousing lost 22,000 jobs for the month.

The stock market appeared to react strongly to the report this morning, with S&P futures going up, but after the morning bell, the major indexes began dropping.

But there are signs in the report that the Federal Reserve may continue to be aggressive in its rate hikes.

In February, the Fed only increased rates by a quarter of a point, slowing down its rate hikes amid positive signs on inflation. But, earlier this week, Fed chair Jerome Powell informed Congress that inflation was heating up again, which would force the Fed to return to more aggressive maneuvers to reach its goal of getting inflation down to 2 percent.

The jobs report is the latest in a somewhat bizarre economic see-saw, where inflation numbers have gone down and then back up, jobs reports and wages running hot, and an aggressive Fed and a timid stock market.

The Wall Street Journal has more on that.

Other recent figures have pointed to a buoyant economy. Consumer spending jumped in January and inflation firmed. Business activity picked up in February. The Federal Reserve is closely monitoring February jobs and inflation figures as it decides how much to raise interest rates this month.

A hot job market has emerged as one of the biggest economic surprises among many twists since the Covid-19 pandemic hit three years ago. With the Federal Reserve aggressively raising interest rates to tame inflation, many economists had expected job gains would cool sharply or even turn into losses by now.

“The labor market’s definitely been stronger at this point than we would have thought maybe six months ago,” said Veronica Clark, economist at Citigroup.

The food service industry is one of the fastest-growing industries, driving a lot of job growth.

The National Restaurant Association is predicting 500,000 jobs in the food service industry this year, most being restaurant staff. On top of that, job growth in industries like food service are helping to offset cuts at major tech firms like Apple, Alphabet (Google’s parent company), and others.

Trending on RedState Video